Matter of City of New York (Neptune Ave.), 28 N.Y.2d 146 (1971)
A condemnation award can be based on the fair market value of property considering its highest and best use as a site for subsidized housing (e.g., a Mitchell-Lama project) if there is a reasonable probability that such a subsidy would have been granted and the project constructed but for the condemnation.
Summary
This case addresses whether the possibility of obtaining a Mitchell-Lama subsidy (a New York State program fostering low-cost housing) can be considered when determining the highest and best use of land taken by condemnation. The Court of Appeals held that it can, provided there is a reasonable probability that the subsidy would have been granted and the project constructed. However, because the claimants in this case failed to adequately demonstrate the likelihood of securing a Mitchell-Lama subsidy, the court reversed the lower court’s award and remanded the case for new findings.
Facts
The City of New York condemned vacant land in Brooklyn for a high school. The land was divided into three pieces and near a subway station, stores, and schools. Across the street was Harway Terrace, a Mitchell-Lama high-rise housing project built in 1961. The claimants’ experts argued the highest and best use of the property was as a site for a high-rise apartment building, valuing it at $3.25-$3.35 per square foot. The city’s expert said the highest and best use was for one and two-family dwellings, valuing it at $0.75-$1.50 per square foot. The city’s expert also noted that an apartment building could only be built if a Mitchell-Lama subsidy was obtained.
Procedural History
The trial court awarded the claimants $2.90 per square foot without a written opinion. The Appellate Division unanimously affirmed this decision. The City of New York then appealed to the New York Court of Appeals.
Issue(s)
Whether the possibility of obtaining a Mitchell-Lama subsidy can be considered in determining the highest and best use of land taken by condemnation, and thus in calculating the condemnation award.
Holding
No, because the claimants failed to adequately demonstrate a reasonable probability that a Mitchell-Lama subsidy would have been granted.
Court’s Reasoning
The court stated that a condemnation award should be determined based on the fair market value of the property in its highest and best use, often determined by comparable sales. It emphasized that the asserted highest and best use must be reasonably probable in the near future, not speculative. The court acknowledged that governmental activity, such as zoning variances, can be considered if obtaining such variances is reasonably probable, citing Masten v. State of New York, 11 A.D.2d 370, affd. 9 N.Y.2d 796. The court reasoned that while sales of other Mitchell-Lama project sites indicated a market for subsidized housing and the possibility of securing a subsidy, the claimants failed to provide sufficient evidence demonstrating the reasonable probability of obtaining a Mitchell-Lama subsidy for the subject property. Specifically, the court noted the “total absence in the record of any evidence concerning the chances of success or failure in obtaining a Mitchell-Lama subsidy.”
As the court stated, “Without such proof, the award cannot stand.” The court emphasized that while the claimants’ expert testified to some plans to purchase the land as a Mitchell-Lama site, the extent of these plans was not adequately explained, and there was no evidence adequately establishing the likelihood of securing a subsidy. The court concluded, “The absence of evidence adequately establishing the likelihood of securing a subsidy makes it impossible to say that there was a reasonable probability that a Mitchell-Lama subsidy could have been obtained to develop this property as a profitable high-rise apartment building site.”